Business

Brazilian Magazine Luiza's profit grows 40% in Q4 and e-commerce continues accelerated in 2021

Magalu announced that its adjusted net income from October to December totaled BRL 232.1 million

Photo: REUTERS/Paulo Whitaker
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  • Same-store sales increased 11%, supported by the easing of circulation restrictions in the period;
  • Since April, Magalu acquired 10 companies, mostly e-commerce startups.

Brazilian Magazine Luiza saw its profit grow 40% in the fourth quarter, as the retail group continued to enjoy the skyrocketing e-commerce, a segment in which it expanded the product shelf, betting on the change in consumer habits given the COVID-19 pandemic.

READ ALSO: Magazine Luiza acquires online retail platform VipCommerce

The company announced on Monday that its adjusted net income from October to December totaled BRL 232.1 million, up 39.8% over a year earlier, also supported by the dilution of operating and financial expenses.

Magalu, as it is also known, saw its total sales grow 66% in the period, to BRL 14.9 billion, driven by the 121% spike in e-commerce, which represented 63.8% of the total. Same-store sales increased 11%, supported by the easing of circulation restrictions in the period.

READ ALSO: Acquired by Magazine Luiza, Brazilian delivery app AiQFome triples sales volume in 2020

Operating expenses grew 47.4%, to BRL 1.986 billion, but fell 1.2% as a proportion of revenue. Strongly affected at the beginning of the pandemic in Brazil about a year ago, when it had to close its more than 1,000 brick-and-mortar stores, the company preyed on its digitalization process already underway to speed up the movement, which allowed it not only to recover but win the physical retail market.

Since April, it has acquired 10 companies, mostly e-commerce startups, including supermarkets to professional courses. Also, it included 32,000 sellers to its marketplace in 12 months. With the results of this turn, the company’s shares rose 110% in 2020.

READ ALSO: From a brick-and-mortar stores chain to the largest Brazilian retail ecosystem: Magazine Luiza’s next steps

According to Magazine Luiza, the increase in sales and the dilution of operating expenses gave impetus to the operating result measured by the profit before taxes, interest, depreciation, and amortization (Ebitda) adjusted, which reached BRL 523.8 million, an increase of 5, 6%. The number came in line with the average forecast of analysts heard by Refinitiv, of 523.3 million.

Yet, investments in service level harmed the adjusted EBITDA margin, which fell from 7.8% to 5.2%.

According to Magazine Luiza’s CEO, Frederico Trajano, this investment is part of the campaign to keep customers and stand out in an increasingly competitive environment, with major players in e-commerce making increasing moves, such as in logistics, to reduce delivery times.

“We want to maintain the consistency of our level of execution, which has made us grow above the market average for the past four years,” Trajano told Reuters.

According to the company, preliminary figures for 2021 show that digital sales are still on the rise, even with the end of Brazil’s government emergency aid, which helped boost retail sales in the second half of last year.

“We started the year at a fast pace, with e-commerce growing triple-digit low in the first two months of 2021,” stated Magazine Luiza in the report.

This should offset the effects of a new wave of Covid-19 in the country, which restored more restrictive measures for circulation and led to the closing of 820 brick-and-mortar stores of the group, with the expectation of new closings in the coming weeks.

(Translated by LABS)

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